System, method, and computer program product for increasing inventory turnover using targeted consumer offers

ABSTRACT

Consumer, merchant, and transactional data from a closed loop network and external sources may be leveraged to increase demand of a merchant&#39;s inventory during normally low-demand periods. Extensive data mining is used to determine the excess merchant inventory and demand patterns at different times and different locations for merchants and groups of merchants. Similar data mining is used to analyze cardmember demand patterns to identify the cardmember preferences regarding when and where they which to purchase goods and/or services. Cardmembers may also be grouped based on their demand patterns. Using pricing as a lever, cardholders with specific preferences are targeted to shift the demand from peak periods and locations to non-peak periods and locations, and to increase the non-peak demand by location as well as time period. Higher precision may be obtained using product level transaction data from point-of-sale terminals used by merchants wherever applicable.

CROSS-REFERENCE TO RELATED APPLICATIONS

The present application claims the benefit of U.S. Provisional PatentApplication No. 60/706,748, filed Aug. 10, 2005, which is incorporatedby reference herein in its entirety.

BACKGROUND OF THE INVENTION

1. Field of the Invention

The present invention relates to targeted consumer marketing.

2. Background Art

Many industries, such as restaurants, hotels, and theatres have fixedcapacity and uneven demand patterns. In the periods where the demand isbelow the capacity, the merchant has excess inventory that will perishquickly. The perishable inventory may include unused tables at arestaurant, unoccupied rooms at a hotel, or empty seats at a theatre. Ifnot utilized, this inventory will produce zero returns. Merchants in thepast have tried to solve this problem by offering broad-based discountsto spur demand during low-demand periods. For example, some retailmerchants have off-season discount sales. As another example, someairline providers sells unsold seats at a discount over the Internet.This broad-based approach, however, results in a low success rate,because the ratio of number of offers to number of acceptances is high.Further, notification of these broad-based discounts is usually onlyavailable to existing customers of a merchant or individualsgeographically located near the merchant.

BRIEF SUMMARY OF THE INVENTION

Through extensive mining of consumer data, merchant data, andtransaction data, card holder preferences can be determined. This datamay be collected using a network of merchants and customers, such as theclosed loop network run by American Express Corp. of New York, N.Y.Customer demand can be predicted at the micro-segment level to establishpricing that maximizes the return on fixed investment for the merchant.The demand patterns of a merchant can also be analyzed to determineperiods of excess inventory of the merchant. For low-demand periodsand/or low-demand locations, selected cardholders may be offereddiscounts to particular merchants. The discounts are customized based oncardholder shopping patterns, travel patterns, and demographics. Insteadof offering broad-based discounts to everyone, this system and methodenables merchants to fine-tune the level of discounts based onindividual cardholder characteristics and preferences. Using pricing asa lever, the cardholders with specific preferences are targeted to shiftdemand from peak periods or locations to non-peak periods or locations,and to increase the non-peak demand by location as well as time period.Merchants can thereby dispose of excess inventory at the highest price,maximizing the return on investments. Cardholders also benefit, as theyhave the option of buying goods and/or services that fit theirpreferences at a discounted price.

Further embodiments, features, and advantages of the present invention,as well as the structure and operation of the various embodiments of thepresent invention, are described in detail below with reference to theaccompanying drawings.

BRIEF DESCRIPTION OF THE DRAWINGS/FIGURES

The accompanying drawings, which are incorporated herein and form a partof the specification, illustrate the present invention and, togetherwith the description, further serve to explain the principles of theinvention and to enable a person skilled in the pertinent art to makeand use the invention.

FIG. 1 is an illustration of example data sources for data mining.

FIG. 2 is an illustration of a sample record of charge that may be usedto obtain customer, merchant, and/or transaction data.

FIG. 3 is a flowchart illustrating an example method by which customersmay be targeted according to an embodiment of the present invention.

FIGS. 4A-4D are charts illustrating demand for example individualrestaurants on a per-day basis.

FIGS. 5A-5C are charts illustrating demand for restaurants acrossexample geographic areas on a per-day basis.

FIGS. 6A-6C are charts illustrating demand for restaurants acrossexample neighborhoods on a per-day basis.

FIGS. 7A-7B are charts illustrating demand by an example customer on aper-day and per-hour basis, respectively.

FIGS. 7C-7D are charts illustrating demand by another example customeron a per-day and per-hour basis, respectively.

FIG. 8 is a flowchart of a method for processing data according to anexample concentric circles algorithm.

FIG. 9 is an illustration of an example result from the method of FIG.8.

FIG. 10 is a flowchart of a method for further processing data accordingto an example concentric circles algorithm.

FIG. 11 is a flowchart of a method for targeting customers.

FIG. 12 is a block diagram of an exemplary computer system useful forimplementing the present invention.

The present invention will be described with reference to theaccompanying drawings.

The drawing in which an element first appears is typically indicated bythe leftmost digit(s) in the corresponding reference number.

DETAILED DESCRIPTION OF THE INVENTION I. Overview

While specific configurations and arrangements are discussed, it shouldbe understood that this is done for illustrative purposes only. A personskilled in the pertinent art will recognize that other configurationsand arrangements can be used without departing from the spirit and scopeof the present invention. It will be apparent to a person skilled in thepertinent art that this invention can also be employed in a variety ofother applications.

The terms “consumer,” “customer,” “participant,” “cardmember,”“cardholder” and/or the plural form of these terms are usedinterchangeably throughout herein to refer to those persons or entitiescapable of accessing, using, be affected by and/or benefiting from thepresent invention.

Furthermore, the terms “business,” “service provider,” or “merchant” maybe used interchangeably with each other and shall mean any person,entity, distributor system, software and/or hardware that is a provider,broker and/or any other entity in the distribution chain of goods orservices. For example, a merchant may be a grocery store, a retailstore, a travel agency, a service provider, an on-line merchant or thelike.

1. Transaction Accounts and Instrument

A “transaction account” as used herein refers to an account associatedwith an open account or a closed account system (as described below).The transaction account may exist in a physical or non-physicalembodiment. For example, a transaction account may be distributed innon-physical embodiments such as an account number, frequent-flyeraccount, telephone calling account or the like. Furthermore, a physicalembodiment of a transaction account may be distributed as a financialinstrument.

A financial transaction instrument may be traditional plastictransaction cards, titanium-containing, or other metal-containing,transaction cards, clear and/or translucent transaction cards, foldableor otherwise unconventionally-sized transaction cards, radio-frequencyenabled transaction cards, or other types of transaction cards, such ascredit, charge, debit, pre-paid or stored-value cards, or any other likefinancial transaction instrument. A financial transaction instrument mayalso have electronic functionality provided by a network of electroniccircuitry that is printed or otherwise incorporated onto or within thetransaction instrument (and typically referred to as a “smart card”), orcan be a fob having a transponder and/or an RFID reader.

2. Open Versus Closed Cards

“Open cards” are financial transaction cards that are generally acceptedat different merchants. Examples of open cards include the AmericanExpress®, Visa®, MasterCard® and Discover® cards, which may be used atmany different retailers and other businesses. In contrast, “closedcards” are financial transaction cards that may be restricted to use ina particular store, a particular chain of stores or a collection ofaffiliated stores. One example of a closed card is a pre-paid gift cardthat may only be purchased at, and only be accepted at, a clothingretailer, such as The Gap® store.

3. Stored Value Cards

Stored value cards are forms of transaction instruments associated withtransaction accounts, wherein the stored value cards provide cashequivalent value that may be used within an existing payment/transactioninfrastructure. Stored value cards are frequently referred to as gift,pre-paid or cash cards, in that money is deposited in an accountassociated with the card before use of the card is allowed. For example,if a customer deposits ten dollars of value into the account associatedwith the stored value card, the card may only be used for payments up toten dollars.

4. Use of Transaction Accounts

With regard to use of a transaction account, users may communicate withmerchants in person (e.g., at the box office), telephonically, orelectronically (e.g., from a user computer via the Internet). During theinteraction, the merchant may offer goods and/or services to the user.The merchant may also offer the user the option of paying for the goodsand/or services using any number of available transaction accounts.Furthermore, the transaction accounts may be used by the merchant as aform of identification of the user. The merchant may have a computingunit implemented in the form of a computer-server, although otherimplementations are possible.

In general, transaction accounts may be used for transactions betweenthe user and merchant through any suitable communication means, such as,for example, a telephone network, intranet, the global, public Internet,a point of interaction device (e.g., a point of sale (POS) device,personal digital assistant (PDA), mobile telephone, kiosk, etc.), onlinecommunications, off-line communications, wireless communications, and/orthe like.

5. Account and Merchant Numbers

An “account,” “account number” or “account code”, as used herein, mayinclude any device, code, number, letter, symbol, digital certificate,smart chip, digital signal, analog signal, biometric or otheridentifier/indicia suitably configured to allow a consumer to access,interact with or communicate with a financial transaction system. Theaccount number may optionally be located on or associated with anyfinancial transaction instrument (e.g., rewards, charge, credit, debit,prepaid, telephone, embossed, smart, magnetic stripe, bar code,transponder or radio frequency card).

The account number may be distributed and stored in any form of plastic,electronic, magnetic, radio frequency (RF), wireless, audio and/oroptical device capable of transmitting or downloading data from itselfto a second device. A customer account number may be, for example, asixteen-digit credit card number. Each credit card issuer has its ownnumbering system, such as the fifteen-digit numbering system used byAmerican Express Company of New York, N.Y. Each issuer's credit cardnumbers comply with that company's standardized format such that anissuer using a sixteen-digit format will generally use four spaced setsof numbers in the form of:

-   -   N₁N₂N₃N₄ N₅N₆N₇N₈ N₉N₁₀N₁₁N₁₂ N₁₃N₁₄N₁₅N₁₆

The first five to seven digits are reserved for processing purposes andidentify the issuing institution, card type, etc. In this example, thelast (sixteenth) digit is typically used as a checksum for thesixteen-digit number. The intermediary eight-to-ten digits are used touniquely identify the customer, card holder or cardmember.

A merchant account number may be, for example, any number oralpha-numeric characters that identifies a particular merchant forpurposes of card acceptance, account reconciliation, reporting and thelike.

6. RFID and Transmission of Magnetic Stripe Data

It should be noted that the transfer of information in accordance withthe present invention, may be done in a format recognizable by amerchant system or account issuer. In that regard, by way of example,the information may be transmitted from an RFID device to an RFIDreader, or from the RFID reader to the merchant system in magneticstripe or multi-track magnetic stripe format.

Because of the proliferation of devices using magnetic stripe format,the standards for coding information in magnetic stripe format werestandardized by the International Organization for Standardization inISO/IEC 7811-n (characteristics for identification cards) which areincorporated herein by reference. The ISO/IEC 7811 standards specify theconditions for conformance, physical characteristics for the card(warpage and surface distortions) and the magnetic stripe area(location, height and surface profile, roughness, adhesion, wear andresistance to chemicals), the signal amplitude performancecharacteristics of the magnetic stripe, the encoding specificationincluding technique (MFM), angle of recording, bit density, fluxtransition spacing variation and signal amplitude, the data structureincluding track format, use of error correction techniques, user datacapacity for ID-1, ID-2 and ID-3 size cards, and decoding techniques,and the location of encoded tracks.

Typically, magnetic stripe information is formatted in three tracks.Certain industry information must be maintained on certain portion ofthe tracks, while other portions of the tracks may have open datafields. The contents of each track and the formatting of the informationprovided to each track is controlled by the ISO/IEC 7811 standard. Forexample, the information must typically be encoded in binary. Track 1 isusually encoded with user information (i.e., name) in alphanumericformat. Track 2 is typically comprised of discretionary andnondiscretionary data fields. In one example, the nondiscretionary fieldmay comprise 19 characters and the discretionary field may comprise 13characters. Track 3 is typically reserved for financial transactions andincludes enciphered versions of the user's personal identificationnumber, country code, current units amount authorized per cycle,subsidiary accounts, and restrictions.

As such, where information is provided in accordance with the presentinvention, it may be provided in magnetic stripe track format. Forexample, the counter values, authentication tags and encryptedidentifiers, described herein, may be forwarded encoded in all or aportion of a data stream representing data encoded in, for example,track 2 or track 3 format.

II. Targeted Marketing

As shown in FIG. 1, several sources may be leveraged to gatherinformation about consumers, merchants and the transactions betweenthem. With a network 102, such as the closed loop network run byAmerican Express Corp. of New York, N.Y., it is possible to gathermerchant data 104, customer data 106, and transaction data 108 oftransactions by a merchant and/or customer based on records from thenetwork owner. In a closed loop network, merchant data 104 is knownbecause of the relationship between the network owner, such as AmericanExpress, and many merchants. Cardholder data 106 is known because of therelationship between the network owner and many cardholders. When acardholder enters into a transaction with a merchant, such as by swipinga transaction instrument through a card reader, information about thatpurchase is added to transaction data 108. Merchant data 104, customerdata 106, and transaction data 108 need not be obtained from a closedloop network, but may be obtained from alternate sources, such as fromcorporate records, from information received directly from customers andmerchants, or through purchase of the information from external sources.Customer relationship management (“CRM”) data 110 and external data 112may also be used to determine information about customers and merchants.External data 112 may include data provided by independent merchantrating services, such as, for example, the ratings provided by ZagatSurvey, LLC, of New York, N.Y.

Merchant data includes, for example and without limitation, the locationof the merchant, the merchant's industry, and the amount of inventorymoved by the merchant at various days, times, and locations. Customerdata includes, for example and without limitation, the types of servicesand products the customer uses, the merchants the customers usuallypurchase from, as well as spend habits and spend capacity of thecustomers.

When a customer interacts with a merchant in a transaction, transactiondata is produced. Simple retail purchases may result in basictransaction information, as shown in FIG. 2. FIG. 2 is an illustrationof a sample receipt 202, showing the type of information that may beobtained from the simple retail purchase. Merchant name and locationinformation 204, day of transaction 206, time of transaction 208, amountof transaction 210, and customer name 212 can all be obtained from arecord of charge such as receipt 202. If the transaction is moredetailed, enhanced information can also be obtained. For example, if acustomer books a flight with an airline, city pairs and dates ofdeparture and/or return may be obtained in addition to the basictransaction information. Most of the consumer transaction data comesfrom data collected when the customer's transaction account is used,such as, for example, when the customer uses a credit card. However, areasonable assumption can be made that consumers paying by cash or checkexhibit similar purchasing patterns as consumers paying by, for example,a credit card.

All this merchant, consumer, and transaction data may be stored in adatabase, referred to herein as a data warehouse. Extensive data miningcan be performed on the information in the data warehouse to matchpotential customers with merchants. FIG. 3 is a flowchart illustratingthe method in which data is taken from the data warehouse and processedto produce a set of targeted customers for particular merchants. Asshown in FIG. 3, data warehouse 302 stores merchant data 104, consumerdata 106, and transaction data 108. Data warehouse 302 may exist, forexample, on a computer usable medium.

Much of the collected data in data warehouse 302 is not useful fortargeting analysis. Useful data is thus taken out of data warehouse 302and transformed so that it is easy to analyze. This data is stored in adatabase specific to the application, referred to herein as a data mart.Much like a data warehouse is a collection of a wide variety ofinformation relating to a wide variety of applications, a data mart is asmaller collection of data specific to a particular application. Forexample, if it is useful to identify customers who would be most likelyto respond to a discount offered by a particular merchant at alow-demand period of the merchant, the data may be stored in aninventory turnover data mart 304 that contains information relevant toinventory turnover. Data mart 304 may be stored, for example, on acomputer usable medium. In data mart 304, the merchant data, consumerdata, and transaction data are reorganized for the specific purpose ofthe analysis.

Merchant information may be extracted from data mart 304. To the extentthat merchant information is combined with related transactioninformation, merchant data and transaction data are segmented. Thesegmentation may be based, for example and without limitation, on time,industry, location, complementary merchants, and/or competing merchantsto identify inventory turnover opportunities using a merchant demandpattern identification prioritization and validation algorithm.

An inventory turnover opportunity exists when a merchant has low demand,also referred to as excess inventory. Excess inventory occurs when themerchant has more of its product than is wanted by its consumers. Excessinventory may include extra units of a product if the merchant is amanufacturer or retailer. Excess inventory may also include empty tablesat a restaurant, empty seats on an airplane, or empty rooms in a hotel.Some merchants have very little excess inventory, and thus may not needto target customers for discounted business. In some cases, it may bedesired to target existing customers to shift demand from peak periodsand locations to non-peak period and locations, such as when the demandfor a good or service is greater than the inventory at a particular timeor location. In other cases, it may be desired to target potentialcustomers to add to the non-peak demand for a location or time period.Although restaurants will be used as an example herein, one of skill inthe pertinent art(s) will recognize that the process applies in asimilar manner to any merchant of goods and services, such as andwithout limitation, a manufacturer, an airline company, a retailer, anentertainment company such as a theatre or cineplex, and a hotelcompany.

In the restaurant example, certain high-end restaurants may be in suchhigh demand that they do not suffer from a lack of reservations duringspecific times. FIG. 4A is a chart showing the demand for an examplehigh-demand Restaurant #1. As shown, the demand for Restaurant #1 isfairly even, and there are no real periods of low demand. Othermerchants may have periods of low demand and could benefit by offeringdiscounts to customers willing to purchase their products or servicesduring those low demand periods. These merchants may be identified usinga merchant demand pattern algorithm. Such an algorithm analyzes themerchant data to determine, for example, the dates and times that themerchant posts the most and/or least revenue. The algorithm may alsocompare similar establishments with a similar customer base and/orsimilar locations to identify demand patterns.

Following the restaurant example, other restaurants may experience lowdemand periods on certain days of the week. FIGS. 4B and 4C are chartsshowing the demand per day for sample Restaurant #2 and sampleRestaurant #3, respectively. As shown, Restaurant #2 and Restaurant #3experience high demand in the middle of the week. However, Restaurant #2experiences periods of low demand on Saturdays and Sundays. Similarly,Restaurant #3 experiences periods of low demand on Saturdays andMondays, as it is closed on Sundays. Restaurant #2 and Restaurant #3 arethus identified as merchants having an opportunity to benefit from aninventory turnover program on weekends. FIG. 4D is a chart showingdemand per day of another sample Restaurant #4, which has high demand onthe weekends, but low demand on weekdays. Restaurant #4 is thusidentified as a merchant having an opportunity to benefit from inventoryturnover assistance on weekdays.

Low-demand periods may also vary by geography. For example, as shown inFIG. 5A, restaurants in the New York City metro area may generallyexperience a low-demand period on Mondays. When the geographicallocation is narrowed down to Brooklyn, restaurants may generallyexperience a low-demand period during weekdays, as shown in FIG. 5B.When the geographical location is narrowed down to Manhattan,restaurants may generally experience a low-demand period during Sundaysand Mondays, as shown in FIG. 5C.

The geographic locations can be further narrowed down and analyzed byneighborhoods. For example, as shown in FIG. 6A, restaurants on theUpper East Side of New York City experience low-demand periods, and thusexcess capacity, on Mondays. As shown in FIG. 6B, restaurants in thefinancial district of New York City may generally experience low-demandperiods on weekends. As shown in FIG. 6C, restaurants in the CentralPark West neighborhood of New York City may generally experiencelow-demand periods on weekdays.

Low-demand periods may also vary by time of day or month of year.Following the restaurant example, although some restaurants may be verybusy in a time slot between 8:00 pm and 11:00 pm, the restaurants mayhave available seating during the time slot between 6:00 pm and 8:00 pm.In another example, some retailers experience a low-demand periodfollowing holidays. In yet another example, merchants in theentertainment industry (such as a theatre) may experience low demand onnon-Friday weekdays. In still another example, a manufacturer, such asan electronics company, may experience lower demand at all times becausea competitor has taken over part of the market.

As mentioned above, merchants that have periods of low demand (excessinventory) are identified based on the merchant information from network102 and other sources such as CRM data 110 and external data 112 thatare stored in data mart 304. Once such merchants are identified, themerchants may be contacted with the information about their demandpatterns. Alternatively, merchants may request that an inventoryturnover analysis be performed for them. If the merchant acceptsinclusion in the inventory turnover program, that merchant'spoint-of-sale (“POS”) data may be integrated into data mart 304. POSdata is useful because it contains information that may not be found inother types of data in data mart 304. For example, although transactiondata may be obtained through purchase records or records of charge ofthe cardholder, those records do not include a record of the specificitems purchased by the cardholder. Specific information may be kept,however, in the POS data records kept internally by the merchant. Forexample, a transaction card provider may know from records of chargethat a cardholder purchased music at a music store, but the music storePOS records will show that the card holder actually purchased classicalmusic at the music store. Adding this POS data to data mart 304 resultsin a more powerful and more accurate targeting of customers most likelyand willing to respond to an offer by the merchant. POS data from themerchant can also be used to validate and segment the opportunity of themerchant to benefit from the inventory turnover program. If the merchantis willing to forego some of the profits made through discounts thatwould bring in additional customers in exchange for having morecustomers at low-demand times, customers whose needs and preferencesmatch those of the merchant can be targeted for marketing.

Consumer data from data mart 304 is therefore analyzed to determinewhich cardholders are most likely to take advantage of a discount offerby the merchant at a particular time or location. Such information canbe gleaned from spending patterns of the cardholder. For example, if acardholder typically makes retail purchases on a certain day of theweek, that cardholder may be likely to take advantage of a discountoffered at a retail store on the same day of the week. As shown in FIGS.7A and 7B, a Customer A may make most of his purchases related to theindustry of the interested merchant on Saturdays at 8:00 p.m. Thisinformation can be determined by reviewing the purchase history ofCustomer A. In contrast, as shown in FIGS. 7C and 7D, a Customer B mayalso make most of his purchases related to the industry of theinterested merchant on Saturday, but around 5:00 p.m. If the interestedmerchant has excess capacity in the early evenings on Saturdays, suchconsumer data will indicate that Customer B would be most likely toaccept an offer for discounted purchases from the merchant in the earlyevenings on Saturdays.

Cardholders may also be analyzed based on data from competing merchantsand/or complementary merchants. Competing merchants are those who are indirect competition with a given merchant and whose products and/orservices typically replace those of the given merchant. Complementarymerchants are those whose products and/or services are typically sold tosimilar consumer groups and enhance, but do not replace, products and/orservices provided by the given merchant. For example, if a merchantexperiencing a low-demand period is a hotel in a particular city, dataregarding customers who may need overnight accommodations in that citymay be obtained from an airline company offering flights to that city.Similarly, if the merchant experiencing a low-demand period is arestaurant, data regarding customers who may accept discounted mealoffers may be obtained from a hotel near the restaurant.

In this manner, data from data mart 304 is processed to identifycustomers most likely to accept an offer from a particular merchantduring that merchant's low-demand period. One type of algorithm that maybe used is a concentric circles algorithm. A concentric circlesalgorithm primarily uses the consumer transaction information availablefrom a record of charge from swiping a card for making payments. Anyother form of transaction information identifiable with the individualcustomer that captures consumer identification, merchant identification,and/or details of the transaction including time, date, amount,location, and/or detailed or aggregated information about the goods orservices bought and sold through that transaction may also be used. Thisalgorithm may also use demographic information about the merchant andthe consumer. The demographic information may be obtained from internalsources as well as data vendors who maintain and supply detailedpersonal databases of large numbers of consumers across the world.

The POS data from the merchant gives further merchant-specific detailsof the transaction. For example, a retailer may have additional detailsrelated to a single transaction such as the list of retail goods and thequantities as well as unit prices of each of the retail goods purchasedby a consumer during a single transaction. This data may be proprietaryor owned by the merchant, and may or may not be available to thealgorithm. However, the algorithm may be designed to use this datawhenever available.

The algorithm considers the most probable set of customers who may betargeted for increasing the inventory turnover for a particular merchantor class of merchants. Hence, it uses a list that begins with existinghigh spending/highly profitable consumers of the merchant andprogressively includes more consumers depending on the merchant desirefor increased demand or depth of inventory. FIG. 8 is a flowchart of amethod 800 for processing data according to an exemplary concentriccircles algorithm. In step 802, a subset of all the transactions for thegiven merchant and/or location going back as far as possible (forexample, a period of 12 months if available, but preferably 3-5 years ifsystem resources available are adequate to handle the processing load)is identified. This identifies a subperiod, such as days, months,seasons, etc.

In step 804, transaction information is summarized per consumer toinclude the sum of the amount spent, number of transactions andprofitability (if available) by each subperiod. The sub-period size willincrease with the money value of the average transaction.

In step 806, consumer demographic, personal, financial, and summarizedtransaction history information is added for each consumer in the list.

In step 808, physical distance (e.g., as a crow flies, or using surfacetransportation) from the customer to the merchant is added to thealgorithm, using cartographic information and/or electronic informationwherever available.

In step 810, the customer list is sorted by, for example, latestsub-period first, with money spent, number of transactions,profitability (when available), transactions during low demand,transactions during high demand, and physical distance from the merchant(when available) as primary factors. This sorted list is the main orcore circle of consumers to which targeted offers for the merchant maybe made with a higher probability of success. If the analysis isperformed by, for example, a transaction card provider, the sorted listmay identify the customers most likely to take advantage of a jointoffer between the merchant and the transaction card provider. These coreconsumers are illustrated by core concentric circle 902 in FIG. 9.

In step 812, within core circle 902, additional concentric circles aredefined. Each concentric circle corresponds to each partition ofconsumers sorted by amount spent in the latest sub-periods with themerchant.

In step 814, each of the groups defined in step 812 are further sortedand ranked based on the volume of transactions within low and highdemand periods as well as physical distance from the merchant. Thegroups thus formed have the inner circles populated by consumers withhigher probability of responding to a targeted offer to transact withthe merchant during low-demand/low-turnover periods. Group 904 in theinnermost circle corresponds to the customers most likely to respond toa discount offer by the merchant.

Referring to FIG. 10, an additional method 1000 may be used to targetcustomers for forming outer circles around core circle 902. In step1002, customers in the customer list that were not included in corecircle 902 are selected based on the following example characteristics:transactions (e.g., amount per transaction or number of transactions)with competing merchants in the vicinity and in the direct marketingarea (“DMA”), transactions with other competing merchants, transactionswith merchants in the same specific industry category (may not bedirectly competing merchants), and transactions with merchants incomplementary industries.

In step 1004, a similar mechanism to method 800 is used to rank and sortthese consumers by the above characteristics, starting with amount andnumber of transactions with competing merchants in the latestsub-periods, in the same industry category and in the complementaryindustry categories.

In step 1006, each of the groups is subdivided by physical distance fromthe merchant, low/high demand period transactions, and/or demographicinformation, which is used more specifically while grouping withinconsumers having activity in the complementary industry category in thelatest sub-periods. The consumers which do not belong to any of thesecircles form outermost circle 906, and represent the customers leastlikely to respond to the merchant offer to use the low demand/lowturnover period.

Additional factors may be included in the concentric circle formations.For example, response rates from any previous offers may be included. Inthis example, the algorithm may use scores from econometric models whichscore all consumers based on responses from earlier targeted offers as aranking variable. The algorithm may also allow flexibility in choosingthe most important factor deciding the innermost concentric circles.

Similar results to the concentric circles algorithm may be achievedusing a simple weighted scoring mechanism where the amount, number oftransactions, period of transactions, profitability, and physicaldistance from the merchant are given weights, and a score is calculatedfor each of the consumers in the consumer list. When this weightedscoring method is used, only the score is used for sorting and rankingthe consumers. However, it is found that many merchants prefer theconcentric circles grouping because it is more simple and intuitive tounderstand without involving mathematics. Additionally, the concentriccircles model assists visual thinking and allows direct interaction withactual consumer information such as amount spent or physical distancerather than a derived score. The scoring method is more useful whileworking with merchants having multilocation or chain operations with alarge number of locations, who require a more computer intensivemechanism than a visual and intuitive mechanism.

Using the consumer groups identified by the consumer algorithm, themerchant can determine which consumer groups should be targeted. In apractical example of the concentric circles algorithm, a classical musicstore merchant may need to target customers for weekday morninglow-demand periods. In this example, 24 million cardmembers are includedin network 102. Out of those 24 million, only 12 million are activelyspending each month. Within that group, only 6 million buy music. Withinthat group, only 2 million purchase classical music. Within that group,there is a subset of 500,000 who make multiple classical music purchasesin a month. Of that group, only 5,000 cardmembers shop in the same areaas the classical music store. Of that group, only 500 cardmembersregularly shop on weekday mornings. Thus, using the concentric circlesalgorithm, those 500 people most likely to buy classical music in thearea on weekday mornings can be specifically targeted by the merchantwithout wasting marketing efforts on those not likely to buy classicalmusic in the area on weekday mornings.

Once the cardmembers most likely to accept an offer by the merchant havebeen identified, they are targeted with the discount offer from themerchant. The cardmembers' information can be analyzed to determineappropriate channels for communicating the merchant's offer to thetargeted cardmembers. The channel may be based on individual cardmemberpreferences, and may include, for example and without limitation, directmail, email, and telephone calls.

Since the discount offer is targeted to the cardmembers most likely toaccept the offer, a higher rate of acceptance is achieved as compared tobroad-based techniques. Once offers have been accepted, informationabout the cardmembers who accept the offer and their transaction datacan be added to data mart 304 to further enhance the targeting process.

FIG. 11 is a flowchart of another example method for targetingcustomers. In step 1102, transaction data, merchant demographic data,and external ratings data are analyzed to classify merchants. Merchantsmay be classified, for example, by capacity utilization patterns.Merchants have different levels of capacity utilization, which may bebased on location, time of day, day of the week, or seasons. In anotherexample, merchants may be classified by the merchant's response to lowdemand. This is also referred to as price elasticity and takes intoconsideration that some merchants reduce prices during low-demandperiods while others tend to maintain prices to protect the brand image.Merchants may also be classified based on how they are rated byindependent critics, geography, and/or the markets served by themerchant.

In step 1104, transaction data is combined with customer demographicdata and, for example, airline data to classify the customers. Customersmay be classified by demand patterns, since customers may havepreferences to shop during specific time slots, on certain days of theweek, or during a particular season. Customers may also be frequentshoppers or non-frequent shoppers. Customers may also be classified bytheir distance from the merchant, and coordinates of the customer andmerchant can be used to calculate the distance. Customers may beclassified based on their travel intent. Airline data, for example, maybe used to identify which customers are traveling where and when.Customers may be classified based on lifestyle, such as whether theyprefer upscale or economy merchants, their age, or how many childrenthey have. Additionally or alternatively, customers may be classifiedbased on their incentive preferences, such as whether the customerresponds to discount incentives or experience incentives.

In step 1106, customers are matched with merchants based on theirpreferences, geography, travel intent, and/or demand/capacity patterns.

In step 1108, a size of spending model is applied to determine how muchspend potential the customer has. Customers having the lowest spendpotential are eliminated from the inventory turnover targeting program.An example spending model that may be used in conjunction with thepresent invention is discussed in U.S. patent application Ser. No.10/978,298, filed Oct. 29, 2004, and titled “Method and Apparatus forEstimating the Spend Capacity of Consumers,” which is incorporated byreference herein in its entirety.

In step 1110, a spend contact model is applied to determine customerswhose spend declines in response to solicitation. These customers arealso eliminated from the inventory turnover targeting program.

In step 1112, merchants and customers are grouped based on complementarydemand/capacity patterns, customer lifestyle, merchantratings/characteristics, and/or geographic proximity (e.g., the customeris either living or will be traveling to a location close to themerchant during the promotion period). Based on the incentivepreferences of the customer, multiple levels of incentive may be testedusing test and learn methodology. The merchant-specific test is thenfielded.

In step 1114, based on the test results, the most successfulcombinations are selected that meet financial hurdles for both themerchant and a financial company controlling the closed loop network.The final discount offer program is based on these combinations toenhance return on investment for the merchant and provide discountedprice and/or a preferred experience to the consumer.

This type of customer targeting offers a powerful marketing tool thatcan be used in many permutations. For instance, the method can bealtered to include data from complementary merchants. In an examplecomplementary merchant scenario, most customers book airline flightsseveral weeks in advance. The airline flight information can be used todetermine a particular area that the customer may be visiting. Based onother transaction data related to the customer's transaction account, itmay be determined that the customer likes to eat at a particular type ofrestaurant. The customer can then be targeted by a restaurant of thepreferred type at the location to which the customer is flying who maybe experiencing a low-demand period at the time of the customer's visit.

Customer targeting need not be restricted to complementary industrytargeting. If there is high demand for a particular product or serviceproduced by one company, and low demand for a product or service ofsimilar quality in a similar location by a second company, customers maybe offered a discount for purchases made from the second company. Thecustomers benefit, because they are given the option of purchasing asimilar item from an alternative company that the customers may not havebeen aware of. The second company also benefits because, even with thediscount, the second company reduces its excess inventory.

Recommendations may also be made based primarily on consumer transactioninformation. A customer may make a purchase from a particular merchant.Data mart 304 may then be searched to determine other customers who alsomade a purchase from the same merchant. Once these additional customersare identified, their transaction data can be analyzed to determine aset of merchants most often used by those additional customers. Theoriginal customer may then be targeted by the set of merchants. Forexample, if a customer makes a purchase at a particular restaurant,other customers who made purchases at the same restaurant areidentified. The most popular restaurants in the same location that theoriginal customer might enjoy can be ranked based on the additionalcustomer transaction information. The original customer can then betargeted with offers from those additional restaurants.

Such systems and methods may be utilized by a financial company, such asa transaction card provider, who operates a network such as network 102.These systems and methods (or any part(s) or function(s) thereof) may beimplemented using hardware, software or a combination thereof, and maybe implemented in one or more computer systems or other processingsystems. However, the manipulations performed by the methods and systemsdisclosed herein were often referred to in terms, such as adding orcomparing, which are commonly associated with mental operationsperformed by a human operator. No such capability of a human operator isnecessary, or desirable in most cases, in any of the operationsdescribed herein which form part of the present invention. Rather, theoperations may be machine operations. Useful machines for performing theoperation of the present invention include general purpose digitalcomputers or similar devices.

In fact, in one embodiment, the invention is directed toward one or morecomputer systems capable of carrying out the functionality describedherein. An example of a computer system 1200 is shown in FIG. 12.

The computer system 1200 includes one or more processors, such asprocessor 1204. The processor 1204 is connected to a communicationinfrastructure 1206 (e.g., a communications bus, cross-over bar, ornetwork). Various software embodiments are described in terms of thisexemplary computer system. After reading this description, it willbecome apparent to a person skilled in the relevant art(s) how toimplement the invention using other computer systems and/orarchitectures.

Computer system 1200 can include a display interface 1202 that forwardsgraphics, text, and other data from the communication infrastructure1206 (or from a frame buffer not shown) for display on the display unit1230.

Computer system 1200 also includes a main memory 1208, preferably randomaccess memory (RAM), and may also include a secondary memory 1210. Thesecondary memory 1210 may include, for example, a hard disk drive 1212and/or a removable storage drive 1214, representing a floppy disk drive,a magnetic tape drive, an optical disk drive, etc. The removable storagedrive 1214 reads from and/or writes to a removable storage unit 1218 ina well known manner. Removable storage unit 1218 represents a floppydisk, magnetic tape, optical disk, etc. which is read by and written toby removable storage drive 1214. As will be appreciated, the removablestorage unit 1218 includes a computer usable storage medium havingstored therein computer software and/or data.

In alternative embodiments, secondary memory 1210 may include othersimilar devices for allowing computer programs or other instructions tobe loaded into computer system 1200. Such devices may include, forexample, a removable storage unit 1218 and an interface 1220. Examplesof such may include a program cartridge and cartridge interface (such asthat found in video game devices), a removable memory chip (such as anerasable programmable read only memory (EPROM), or programmable readonly memory (PROM)) and associated socket, and other removable storageunits 1218 and interfaces 1220, which allow software and data to betransferred from the removable storage unit 1218 to computer system1200.

Computer system 1200 may also include a communications interface 1224.Communications interface 1224 allows software and data to be transferredbetween computer system 1200 and external devices. Examples ofcommunications interface 1224 may include a modem, a network interface(such as an Ethernet card), a communications port, a Personal ComputerMemory Card International Association (PCMCIA) slot and card, etc.Software and data transferred via communications interface 1224 may bein the form of signals 1228 which may be electronic, electromagnetic,optical or other signals capable of being received by communicationsinterface 1224. These signals 1228 are provided to communicationsinterface 1224 via a communications path (e.g., channel) 1226. Thischannel 1226 carries signals 1228 and may be implemented using wire orcable, fiber optics, a telephone line, a cellular link, an radiofrequency (RF) link and other communications channels.

In this document, the terms “computer program medium” and “computerusable medium” are used to generally refer to media such as removablestorage drive 1214, a hard disk installed in hard disk drive 1212, andsignals 1228. These computer program products provide software tocomputer system 1200. The invention is directed to such computer programproducts.

Computer programs (also referred to as computer control logic) arestored in main memory 1208 and/or secondary memory 1210. Computerprograms may also be received via communications interface 1224. Suchcomputer programs, when executed, enable the computer system 1200 toperform the features of the present invention, as discussed herein. Inparticular, the computer programs, when executed, enable the processor1204 to perform the features of the present invention. Accordingly, suchcomputer programs represent controllers of the computer system 1200.

In an embodiment where the invention is implemented using software, thesoftware may be stored in a computer program product and loaded intocomputer system 1200 using removable storage drive 1214, hard drive 1212or communications interface 1224. The control logic (software), whenexecuted by the processor 1204, causes the processor 1204 to perform thefunctions of the invention as described herein.

In another embodiment, the invention is implemented primarily inhardware using, for example, hardware components such as applicationspecific integrated circuits (ASICs). Implementation of the hardwarestate machine so as to perform the functions described herein will beapparent to persons skilled in the relevant art(s).

In yet another embodiment, the invention is implemented using acombination of both hardware and software.

III. Conclusion

Thus, the entire transaction data set is used to identify lowertransaction periods by determining the locations, time periods,industries, and merchants having a lower demand, lower inventoryturnover, and/or lower utilization of fixed capacity. Groups ofmerchants with similar, opposite, and/or complementary demand patternsare then identified. Using the merchant groups, consumers are alsogrouped by location, time period, industry, and past or potentialtransactions with these merchant groups. The groups are then matched tomake targeted consumer offers to increase the demand and increase theinventory turnover or capacity utilization. The same process is alsoused to shift the demand between time periods, merchants, and locationsas well as to control the demand patterns using calibrated offers and tofine-tune the number of consumers targeted. The process is applied withhigher precision using product level transaction data from POS terminalsused by merchants wherever available.

This solves the problem by bringing together unused or wasted inventory,not only of producers and retailers but also of service establishmentswhere empty merchant establishments drag down the overall economicoutput. A financial company controlling the network through which thetransactions are made, such as a transaction card provider, may alsobenefit from this solution. Benefits may be realized through, forexample, increased discount revenue, a higher satisfaction level bycardmembers, improved merchant and consumer experience, increasedreturns on data collection, management, and analysis investments,increased demonstration of competitive advantages of the closed loopnetwork, and increased justification for higher discount rates chargedto merchants. At an individual level, this system and method result inthe merchant earning more by increasing the utilization of themerchant's manufacturing, service, or retail establishment for which heis incurring fixed costs all the time. Merchants also benefit fromincreased capacity utilization, increased inventory turnover, higherpricing power based on increased demand management, and better targetedcustomer offers. Cardmembers benefit from better products and servicesat lower prices from merchants of choice. Manufacturers benefit frombetter inventory management, seasonal demand management, and thepossibility of joint offers with merchants and the financial company.Others benefit from the economy-wide higher utilization of inventory,lower wastages due to unused capacities or unsold inventories, higherproductivity, higher tax revenues for the government, and quickeradjustment of merchants and consumers to economic downturns andrecessions.

While various embodiments of the present invention have been describedabove, it should be understood that they have been presented by way ofexample, and not limitation. It will be apparent to persons skilled inthe relevant art(s) that various changes in form and detail can be madetherein without departing from the spirit and scope of the presentinvention. Thus, the present invention should not be limited by any ofthe above described exemplary embodiments, but should be defined only inaccordance with the following claims and their equivalents.

In addition, it should be understood that the figures and screen shotsillustrated in the attachments, which highlight the functionality andadvantages of the present invention, are presented for example purposesonly. The architecture of the present invention is sufficiently flexibleand configurable, such that it may be utilized (and navigated) in waysother than that shown in the accompanying figures.

Further, the purpose of the foregoing Abstract is to enable the U.S.Patent and Trademark Office and the public generally, and especially thescientists, engineers and practitioners in the art who are not familiarwith patent or legal terms or phraseology, to determine quickly from acursory inspection the nature and essence of the technical disclosure ofthe application. The Abstract is not intended to be limiting as to thescope of the present invention in any way.

1. A method, comprising: collecting, by a computer based system fortailored marketing of consumers, merchant data, consumer data, andtransaction data; identifying, by the computer based system, a period ofexcess inventory of a merchant based on the merchant data; identifying,by the computer based system, customers likely to respond to tailoredmarketing for the merchant based on the consumer data and thetransaction data; and sorting, by the computer based system andaccording to a concentric circles algorithm, the identified customersbased on the likelihood of the customers to respond to the tailoredmarketing for the merchant, wherein the concentric circles algorithmcomprises: identifying, by the computer-based system, a first group ofthe merchants identified customers based upon a first spending amount;identifying, by the computer-based system, a second group of themerchant's identified customers based upon a second spending amount,wherein the second spending amount is less than the first spendingamount, and wherein the second group of the merchant's identifiedcustomers includes the first group of the merchant's identifiedcustomers; and selecting for tailored marketing, by the computer-basedsystem, the second group of the merchant's identified customers basedupon the merchant's desire for increased demand during the period ofexcess inventory.
 2. The method of claim 1, wherein the identifying theperiod of excess inventory comprises identifying, by the computer-basedsystem, dates and times that the merchant posts the least revenue. 3.The method of claim 1, wherein the identifying the period of excessinventory comprises identifying, by the computer-based system, demandpatterns of merchants having a customer base similar to a customer baseof the merchant.
 4. The method of claim 1, further comprising:contacting, by the computer-based system, the merchant to offer tailoredmarketing opportunities.
 5. The method of claim 1, further comprisingintegrating, by the computer-based system, point of sale data from themerchant into the merchant data.
 6. The method of claim 1, wherein theidentifying customers comprises determining, by the computer-basedsystem, customer spending patterns related to an industry of themerchant.
 7. The method of claim 6, wherein the identifying customersfurther comprises analyzing, by the computer-based system, the customerspending patterns based on data from at least one of a competingmerchant or a complementary merchant.
 8. The method of claim 1, whereinthe sorting further comprises: identifying, by the computer-basedsystem, transactions for the merchant over a maximum period of time,wherein the maximum period of time comprises a subperiod; summarizing,by the computer-based system, the identified transactions to include thesum of the amount spent per identified customer and the number oftransactions per identified customer for the subperiod; determining, bythe computer-based system, demographic information and financialinformation for each identified customer; determining, by thecomputer-based system, physical distance from each identified customerto the merchant; and sorting, by the computer-based system, theidentified customers based on the transaction summary, demographicinformation, financial information, and physical distance for eachidentified customer.
 9. The method of claim 8, wherein the sortingfurther comprises: further sorting, by the computer-based system, theidentified customers based on volume of transactions of each identifiedcustomer within low and high demand periods.
 10. The method of claim 9,wherein the sorting further comprises: further sorting, by thecomputer-based system, the identified customers based on at least oneof: transactions of the identified customers with competing merchants inthe vicinity and direct marketing area of the merchant; transactions ofthe identified customers with all competing merchants; transactions ofthe identified customers with merchants in a same industry category asthe merchant; or transactions of the identified customers with merchantsin complementary industries.
 11. The method of claim 1, wherein thesorting step further comprises: sorting, by the computer-based system,customers according to a weighted scoring mechanism.
 12. The method ofclaim 11, wherein the sorting further comprises: assigning, by thecomputer-based system, a weight to each of: a transaction amount peridentified customer, a number of transactions per identified customer,and physical distance from each identified customer to the merchant;assigning, by the computer based system, a value for each identifiedcustomer to each of: the transaction amount per identified customer, thenumber of transactions per identified customer, and the physicaldistance from each identified customer to the merchant; determining, bythe computer-based system, a score for each customer based on theassigned weights and values; and sorting, by the computer-based system,the identified customers based on the score for each identifiedcustomer.
 13. A system, comprising: a processor for tailored marketingof consumers; a tangible, non-transitory memory configured tocommunicate with the processor, the tangible, non-transitory memoryhaving instructions stored thereon that, in response to execution by theprocessor, cause the processor to perform operations comprising:collecting, by the processor, merchant data, consumer data, andtransaction data; identifying, by the processor, a period of excessinventory of a merchant based on the merchant data; identifying, by theprocessor, customers likely to respond to tailored marketing for themerchant based on the consumer data and transaction data; and sorting,by the processor and according to a concentric circles algorithm, theidentified customers based on the likelihood of the customers to respondto tailored marketing for the merchant, wherein the concentric circlesalgorithm comprises: identifying, by the processor, a first group of themerchant's identified customers based upon a first spending amount;identifying, by the processor, a second group of the merchant'sidentified customers based upon a second spending amount, wherein thesecond spending amount is less than the first spending amount, andwherein the second group of the merchant's identified customers includesthe first group of the merchants identified customers; and selecting fortailored marketing, by the processor, the second group of the merchant'sidentified customers based upon the merchants desire for increaseddemand during the period of excess inventory.
 14. The system of claim13, wherein the identifying a period of excess inventory comprisesidentifying, by the processor, dates and times that the merchant poststhe least revenue.
 15. The system of claim 13, wherein identifying aperiod of excess inventory comprises identifying, by the processor,demand patterns of merchants having a customer base similar to acustomer base of the merchant.
 16. The system of claim 13, furthercomprising contacting, by the processor, the merchant to offer tailoredmarketing opportunities.
 17. The system of claim 13, further comprisingintegrating, by the processor, point of sale data from the merchant intothe merchant data.
 18. The system of claim 13, wherein the identifyingcustomers comprises determining, by the processor, customer spendingpatterns related to an industry of the merchant.
 19. The system of claim18, wherein the identifying customers further comprises analyzing, bythe processor, the customer spending patterns based on data from atleast one of a competing merchant or a complementary merchant.
 20. Thesystem of claim 13, wherein the sorting further comprises: identifying,by the processor, transactions for the merchant over a maximum period oftime, wherein the maximum period of time comprises a subperiod;summarizing, by the processor, the identified transactions to includethe sum of the amount spent per identified customer and the number oftransactions per identified customer for the subperiod; determining, bythe processor, demographic information and financial information foreach identified customer; determining, by the processor, physicaldistance from each identified customer to the merchant; and sorting, bythe processor, the identified customers based on the transactionsummary, demographic information, financial information, and physicaldistance for each identified customer.
 21. The system of claim 20,wherein sorting further comprises: further sorting the identifiedcustomers based on at least one of: volume of transactions of eachidentified customer within low and high demand periods; transactions ofthe identified customers with competing merchants in the vicinity anddirect marketing area of the merchant: transactions of the identifiedcustomers with all competing merchants; transactions of the identifiedcustomers with merchants in a same industry category as the merchant; ortransactions of the identified customers with merchants in complementaryindustries.
 22. The system of claim 13, wherein the sorting comprises:sorting, by the processor, customers according to a weighted scoringmechanism.
 23. The system of claim 22, wherein the sorting comprises:assigning, by the processor, a weight to each of: a transaction amountper identified customer, a number of transactions per identifiedcustomer, and physical distance from each identified customer to themerchant; assigning, by the processor, a value for each identifiedcustomer to each of: the transaction amount per identified customer, thenumber of transactions per identified customer, and the physicaldistance from each identified customer to the merchant; determining, bythe processor, a score for each customer based on the assigned weightsand values; and sorting, by the processor, the identified customersbased on the score for each identified customer.
 24. An article ofmanufacture including a non-transitory, tangible computer readablestorage medium having instructions stored thereon that, in response toexecution by a computer-based system for tailored marketing ofconsumers, cause the computer-based system to perform operationscomprising: collecting, by the computer based system, merchant data,consumer data, and transaction data; identifying, by the computer basedsystem, a period of excess inventory of a merchant based on the merchantdata; identifying, by the computer based system, customers likely torespond to tailored marketing for the merchant based on the consumerdata and transaction data; and sorting, by the computer based system andaccording to a concentric circles algorithm, the identified customersbased on the likelihood of the customers to respond to tailoredmarketing for the merchant, wherein the concentric circles algorithmcomprises: identifying, by the computer-based system, a first group ofthe merchants identified customers based upon a first spending amount;identifying, by the computer-based system, a second group of themerchant's identified customers based upon a second spending amount,wherein the second spending amount is less than the first spendingamount, and where the second group of the merchant's identifiedcustomers includes the first group of the merchant's identifiedcustomers; and selecting for tailored marketing, by the computer-basedsystem, the second group of the merchant's identified customers basedupon the merchant's desire for increased demand during the period ofexcess inventory.